BOSTON, Mass., April 13, 2018 (GLOBE NEWSWIRE) -- 55ip, an investment strategy engine that enables advisors to custom-build portfolio strategies using industry-leading investment science, today released its April 2018 Market Risk Indicator (MRI) Score. The MRI Score is a proprietary measure that seeks to assess the likelihood of extreme market conditions and help investors protect their portfolio from significant losses. This score can range from 0 - 100%, with 0% being the lowest possible risk assessment. April 2018 received the highest-recorded MRI Score in two years at a total of 48%.
55ip designed the proprietary MRI Score as a quantitative way to assess the likelihood of extreme market conditions and help investors protect their portfolios from significant losses. The MRI Score aggregates indicators across 4 categories:
- Valuation (e.g. price to book ratio)
- Macroeconomic conditions (e.g. manufacturing sentiment index)
- Financing indicators (e.g. trend indicators)
- Statistical measures of return distributions (e.g. multi-asset market volatility)
“Taken together, this reading on the MRI is high and indicates to us a higher likelihood of an extreme market move,” said Dr. Vinay Nair, founder and chairman of 55ip. “Whether the market move is up or down will depend on how and when the risk will be resolved. On an average, the data suggests to us that such readings are accompanied by fewer down moves relative to up moves, but most importantly the magnitude of the down moves are stronger than the magnitude of the up moves. For those clients who cannot afford to face extreme losses or do not have time to recover from such losses, we believe it is prudent to increase cash positions and/or decrease overall risk.”
Drivers of the change in MRI
The high MRI Score in April 2018 is largely driven by multiple changes. Overall, market conditions indicate a significant increase in perceived risk as identified by statistical measures of return distributions. The intraday return patterns suggest rising instability and ambiguity, linkages between asset classes show increased co-movements, levels of implied volatility across asset classes are higher and the past month’s return patterns are statistically different from what economists have seen in the recent past.
In addition, some indicators of financing costs are rising. Most notably, the trend in credit spreads has reversed and the spread between high yield and investment grade bonds is now below a critical trend line. The demand for yield that kept spreads suppressed for a prolonged period is worth watching and can have material implications for several companies that have raised a large amount of capital from credit markets.
“Recent periods preceded by a high MRI include June 2016 (pre-Brexit) and October 2016 (pre-U.S. election),” concluded Dr Nair. “At the same time, the fundamentals across macro indicators and valuations appear to us to present no cause for immediate concern.”
For the full Market Risk Indicator monthly update report, visit www.55-ip.com For more information or to speak with a 55ip spokesperson, contact 55ip@ficommpartners.com.
About 55ip
Founded in 2015 and headquartered in Boston, 55ip is an investment strategy engine that provides partner firms (financial advisors and wealth managers) the capabilities to build intelligent, custom models for their clients on white labeled software. 55ip’s proprietary investment science addresses the four most common frictions that get in the way of client outcomes – taxes, high fees, extreme losses, and time – while automating the entire investment management process so advisors can focus on growing and scaling their practices.
All advisory services are provided by 55I, LLC, a SEC registered investment advisor. More information is available at https://www.55-ip.com.
Disclaimer 55ip is the marketing name used by 55 Institutional Partners, LLC, an investment technology developer, and for investment advisory services provided by 55I, LLC, an SEC-registered investment adviser. These materials are intended for Registered Investment Advisors only and describe a risk management strategy that may not work as intended, in part because the strategy is not modified more frequently than monthly. As a result, the strategy cannot be counted on to provide protection to client portfolios. Even when using the strategy, portfolios remain subject to multiple risks, including the risk of loss of the entire amount invested. 55ip has been calculating the MRI monthly and applying it to managed assets since April 2016. 55ip has calculated a hypothetical monthly MRI back to April 2004 using varying inputs and blends of indicator categories. Registration does not imply any certain level of skill of training.
The information contained herein is subject to change without notice, is not complete and does not contain certain material information about the investment strategy, including additional important disclosures and risk factors associated with such investment and information about fees, trading costs and taxes. Neither the U.S. Securities and Exchange Commission nor any state securities administrator has approved or disapproved, passed on, or endorsed, the merits of this document.